ERISA (the Employee Retirement Income Security Act) was passed into law in 1974. Not surprisingly, ERISA governs specific standards regarding the establishment and operation of employee pension plans in the private sector. In order to prevent scenarios where employers do not disclose certain essential aspects of their pension plans, ERISA mandates that all eligible employees are provided with specific documentation regarding their pension. This information includes, but is not limited to: how benefits accrue, minimum standards for enrollment in the pension plan, accountability information for fiduciaries, as well as information regarding the legal rights of pension plan enrollees with regard to lawsuits. Occasionally these class-action suits become necessary to combat employer breaches of conduct.
All of these federal protections are extended to employees, but what of the self-insurance plan options for employers and employees? Self-insuring for health insurance can be monumentally expensive, so does the Employee Retirement Income Security Act deal with any protections for the large number of self-insured, self-employed members of the U.S. workforce? Under ERISA, self-insured health insurance means that employers elect to directly finance the costs of their employees’ healthcare services. How this translates into practice is that if a company has a full-time staff full of healthy employees, health insurance costs are going to be substantially less than if the staff was elderly or otherwise unhealthy.
Understandably, self-insured health insurance options for employers have produced anxiety in employees. In the past, self-insured health insurance was usually found in very large companies with huge pools of labor to cover the risks associated with directly financing their employees’ healthcare services. With the passage of the Affordable Care Act (otherwise known as Obamacare), small business owners may elect to shift to self-insured health insurance as well. This represents higher risk, since a small business owner likely does not have a large pool of employees to offset costs if a few employees get seriously ill or injured over the course of the fiscal year.
Small business owners are encouraged to fully explore the Small Business Health Options Program (SHOP), a huge online marketplace that allows employers to directly compare the costs of different kinds of health insurance coverage for their employees. Through the Small Business Health Options Program, employers can evaluate the pros and cons of a self-insured health insurance plan versus more traditional models. Employers may also wish to plan specific health initiatives and preventative lifestyle training if they plan on implementing a small-scale self-insured health insurance plan. What this equates to is that the healthier their employees are, the fewer costs for healthcare services they are likely to incur.